When you default on credit payments, your creditor -- be it a department store, car dealer, or credit-card company -- is often the first to contact you. Unlike debt-collection agencies, individual creditors aren't bound by the restrictions of the Fair Debt Collection Practices Act. They must, however, abide by the guidelines of state regulations. To review the collection laws that apply to your state, visit the Consumer Action Website and click on the appropriate state link.

Once your account has been sold to a collection agency, that agency is legally obligated to operate within the guidelines of the FDCPA. Most agencies do. Some, however, follow their own loose interpretation of the guidelines. Knowledge of the FDCPA is essential in order to determine if you've been unfairly harassed or threatened by a collection agency.

Collection agencies usually contact debtors via phone or mail, although contact by telegram or fax is also allowed under the FDCPA. The only means of contact not allowed by the act is a postcard. The act doesn't address contact by e-mail, cell phone or text messaging, although these means are currently prohibited under federal law. In October 2007, however, the debt collection industry appealed to the U.S. government and the Federal Trade Commission to allow for e-mail and cell phone contact. The FTC has yet to make a decision on this issue [source: Poirier].

A debt collector must contact you at a convenient time, specified within the FDCPA as not before 8:00 a.m. or after 9:00 p.m. Collectors aren't allowed to call you at work if they know your employer disapproves of such calls.

If you've hired an attorney, collectors must deal exclusively with the attorney unless your attorney gives permission for them to contact you. Attorneys are the only third party with whom a collector can discuss your debt. They can contact your friends, employer and family members, but only to obtain such basic information as your address and phone number.

Debt collectors must be honest with you. They can't pretend to be lawyers or government employees, nor send you documents disguised to look like legal papers (although they may send you legitimate legal papers if they've initiated legal action against you).

Threats, harassment, insults and obscene or abusive language are prohibited. Collectors can't accuse you of having committed a crime or threaten to have you arrested. Nor can they threaten to take legal action or garnish your wages if they have no intention of doing so. In addition, they must refrain from harassment by calling you repeatedly (unless you refuse to answer your phone, an ill-advised course of action).

A debt collector may not collect more than what you owed your original creditor. You aren't obligated to pay any interest on your debt (unless you agreed to do so in your original purchase agreement), nor to reimburse the debt collector for phone calls and postage.

What's more important than knowing the rules for debt collectors? Knowing your own rights. We'll cover that next.

Dealing with an Unscrupulous Collector

The most unscrupulous agencies might prey upon customer ignorance and ignore the FDCPA altogether. In such instances, debtors have a legitimate reason to complain to the Federal Trade Commission or the Better Business Bureau. In extreme cases, an attorney may advise you to take legal action against the collection agency. If that happens, ironically, the agency may wind up owing you money.